[Federal Register Volume 62, Number 250 (Wednesday, December 31, 1997)]
[Notices]
[Pages 68330-68331]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-33993]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39482; File No. SR-NASD-97-86]
Self--Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the National Association of
Securities Dealers, Inc. Relating to Small Order Execution System Tier
Classification
December 22, 1997.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on December 12, 1997, the
National Association of Securities Dealers (``NASD'' or Association)
filed with the Securities and Exchange Commission (``SEC'' or
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the self-regulatory
organization.\2\ The Commission is publishing this notice to solicit
comments on the proposed rule change, as amended, from interested
persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ See letter from Robert E. Aber, Vice President and General
Counsel, Nasdaq, to Katherine England, Assistant Director, SEC,
dated Dec. 11, 1997 (``Amendment No. 1''). The Exchange initially
submitted the proposal on December 4, 1997. However, at the
Commission's request, the Exchange filed Amendment No. 1 to the
proposed rule change on December 12, 1997. Amendment No. 1 corrects
a typographical error in the SOES tier-size classification criteria
used by the Nasdaq. Amendment No. 1 also clarifies that, despite the
typographical error, the correct criteria set out in NASD Rules
4613(a)(2) and 4710(g) was used by Nasdaq in reclassifying the SOES
tier sizes. The correction was also made in the Notice to Members
97-90.
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The NASD is submitting this filing to effectuate The Nasdaq Stock
Market, Inc.'s (``Nasdaq'') periodic reclassification of Nasdaq
National Market (``NNM'') securities into appropriate tier sizes for
purposes of determining the maximum size order for a particular
security eligible for execution through Nasdaq's Small Order Execution
System (``SOES''). Specifically, under the proposal, 544 NNM securities
will be reclassified into a different SOES tier size effective January
1, 1998. Since the NASD's proposal is an interpretation of existing
NASD rules, there are no language changes.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for the Proposed Rule Change
In its filing with the Commission, the NASD included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements and a copy of the Notice-to-Members may be
examined at the places specified in Item IV below. The NASD has
prepared summaries, set forth in Sections A, B, and C below, of the
most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the rule change is to effectuate Nasdaq's periodic
reclassification of NNM securities into appropriate tier sizes for
purposes of determining the maximum size order for a particular
security eligible for execution through SOES. Nasdaq periodically
reviews the SOES tier size applicable to each NNM security to determine
if the trading characteristics of the issue have changed so as to
warrant a tier size adjustment. Such a review was conducted using data
as of September 30, 1997, pursuant to the following established
criteria.\3\
\3\ The classification criteria are set forth in NASD Rule
4613(a)(2) and the footnote to NASD Rule 4710(g).
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NNM securities with an average daily non-block volume of 3,000
shares or more a day, a bid price less than or equal to $100, and
three or more market makers are subject to a minimum quotation size
requirement of 1,000 shares and a maximum SOES order size of 1,000
shares;
NNM securities with an average daily non-block volume of 1,000
shares or more a day, a bid price less than or equal to $150, and
two or more market makers are subject to a minimum quotation size
requirement of 500 shares and a maximum SOES order size of 500
shares; and
NNM securities with an average daily non-block volume of less
than 1,000 shares a day, a bid price less than or equal to $250, and
two or more market makers are subject to a minimum quotation size
requirement of 200 shares and a maximum SOES order size of 200
shares.
Pursuant to the application of this classification criteria, 544
NNM securities will be reclassified effective January 1, 1998. These
544 NNM securities are set out in the NASD's Notice to Members 97-90
(December, 1997).
In ranking NNM securities pursuant to the established
classification criteria, Nasdaq followed the changes dictated by the
criteria with three exceptions. First, an issue was not moved more than
one tier size level. For example, if an issue was previously
categorized in the 1,000-share tier size, it would not be permitted to
move to the 200-share tier even if the reclassification criteria showed
that such a move was warranted. In adopting this policy, Nasdaq was
attempting to maintain adequate public investor access to the market
for issues in which the tier size level decreased and help ensure the
ongoing participation of market makers in SOES for issues in which the
tier size level increased. Second, for securities priced below $1 where
the reranking called for a reduction in tier size, the tier size was
not reduced. Third, for the top 50 Nasdaq securities based on market
capitalization, the SOES tier sizes were not reduced regardless of
whether the reranking called for a tier-size reduction.
2. Statutory Basis
The NASD believes the proposed rule change is consistent with
Section 15A(b)(6) of the Act.\4\ Section 15A(b)(6) requires that the
rules of a national securities association be designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, to foster cooperation and coordination
with persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in
securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system and, in general, to
protect investors and the public interest. Specifically, the NASD
believes that the reassignment of NNM securities within SOES tier size
levels will further these ends by providing an efficient mechanism for
small, retail investors to execute their orders on Nasdaq and by
providing investors with the assurance that they can effect trades up
to a certain size at the best prices quoted on Nasdaq.
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\4\ 15 U.S.C. Sec. 78o-3.
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[[Page 68331]]
B. Self-Regulatory Organization's Statement on Competition
The proposed rule change does not impose any burden on competition
that is not necessary or appropriate in furtherance of the purposes of
the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Association has neither solicited nor received written comments
on the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing
for Commission Action
The foregoing rule change constitutes a stated policy, practice, or
interpretation with respect to the meaning, administration, or
enforcement of an existing rule and, therefore, has become effective
pursuant to Section 19(b)(3)(A)(i) of the Act \5\ and subparagraph (e)
of Rule 19b-4 thereunder.\6\
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\5\ 15 U.S.C. 78s(b)(3)(A).
\6\ 17 CFR 240.19b-4(e).
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At any time within sixty days of the filing of such proposed rule
change, the Commission may summarily abrogate such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. Sec. 552, will be available for inspection and copying at
the Commission's Public Reference Room. Copies of such filing also will
be available for inspection and copying at the principal office of the
NASD. All submissions should refer to File No. SR-NASD-97-86 and should
be submitted by January 21, 1998.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\7\
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\7\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-33993 Filed 12-30-97; 8:45 am]
BILLING CODE 8010-01-M